The Union cabinet on Monday approved settlement of legacy food cash credit accounts (up to crop season 2014-15) of the Punjab government for food procurement operations.
This proposal of department of expenditure was approved by Prime Minister under Rule 12 of (transaction of business) Rules, 1961, on January 2, 2017, an official statement said.
It further said early settlement of legacy issues will help banks in disbursement of food credit in the larger interest of numerous farmers of the state and uninterrupted continuity in food procurement operations to ensure food security for the nation.
Settlement of outstanding cash-credit limits (CCL) account by availing term loan by the Punjab government would entail savings in terms of interest payment, the statement said, adding “this will create additional resource enabling Punjab government to undertake capital expenditure”.
The outstanding amount in cash-credit accounts of Punjab up to kharif marketing season 2014-15 amounting to about Rs 31,000 crore shall be converted into a term loan. It will be repayable in half-yearly instalments over a period of 20 years with the option for pre-payment. The terms and conditions of the loan shall be as prescribed by the Reserve Bank of India (RBI) and the lending banks, the statement added.
Noting that the 14th Finance Commission has prescribed the fiscal roadmap for each state for its award period 2015-20 and anchored their fiscal deficit to an annual limit of 3% of state’s gross state domestic product (GSDP), the statement said.
“The term loan proposed to be extended to Punjab government in current financial year... will not be counted in the fiscal deficit limit of Punjab government in 2016-17,” the statement said.
After the conversion of legacy accounts in long-term loan, the Punjab government may issue bonds for the purpose of paying back the loan. “This will be subject to the approval of consortium of banks and RBI. The Union government consent will be issued for swapping of loan in the same year of issue of bonds,” the statement said.
“The Punjab government shall enter into a tripartite agreement with the Government of India and the RBI irrevocably authorising the Centre to deduct, in case the Punjab government fails to make any payment towards principal or interest of the term loan on due dates, such defaulted amount from the state’s share in central taxes and pay the same to the State Bank of India consortium, said the statement.